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  • Overview

    Q&A Times of Tunbridge Wells - Corporate & Commercial April 2020

    Selling a business

    Q. Is this a good time to be selling my business?

    A. Despite the pandemic, the mergers and acquisitions (M&A) market is still very much active. Many investors, as well as trade-buyers, are currently looking for businesses to invest into or to acquire. 

    Q. Who would be interested in buying my business?

    A. Usually there are two groups of buyers – investors and trade-buyers. An example of an investor could be a private equity firm who is looking to invest in a business alongside management in order to grow the business in short order. An example of a trade-buyer could be a member of your supply chain who is looking to “vertically” expand its operations. 
    Q. How do I start the process of selling my business?

    A. If you have already been approached by a buyer, it would just be a matter of agreeing the terms of the sale (including the price!), and ensuring these are legally documented.

    If you do not have a buyer in mind, you may want to consider approaching a Corporate Finance house – who are specialists that provide financial advice on “exiting” a business. These Corporate Finance houses often approach parties they believe may be interested in your business in order to broker a sale.

    Q. So I have a buyer, what next?

    A. This is usually the stage that specialist M&A lawyers, such as our team at Thomson Snell & Passmore, would come in.

    The three main roles of an M&A lawyer are to:
    (i)    guide you through the sale process;
    (ii)    assist you with the buyer’s due diligence (whereby a buyer will seek to review your company’s key documentation – such as customer agreements, employment contracts, accounts, etc. – to ensure they are happy to purchase the business); and
    (iii)    ensure you are appropriately legally protected in respect of the sale.

    Q. What are the key legal documents that I need for the sale?

    A. This really depends on the nature and terms of the sale between yourself and the buyer. However, generally in an M&A transaction you can expect to see (as a minimum): 

    a) a business sale agreement – setting out the terms of the sale;
    b) a stock transfer form – to legally effect the sale;
    c) a disclosure letter – a letter which discloses known “issues” with the business; 
    d) new employment agreements – if you or key employees are to be incentivised to stay and help grow the business; and
    e) consents – company consents, as well as any third party consents required by the buyer.  

    Q. How do I find out more if I would like to sell my business?

    A. We would suggest you get in contact to discuss. There are numerous different ways of selling a business or seeking investment, and our M&A team at Thomson Snell & Passmore has extensive experience of guiding sellers (and buyers) through the process.

    Q&A Times of Tunbridge Wells - Corporate & Commercial April 2018

    Q. The budget seemed ‘much ado about nothing, did I miss something?’
    A. That’s not far off the mark, particularly given the U turn on increases to national insurance for the self employed. However, there was some good new for businesses.

    Q. Given the likely impact of the business rates revaluation, were the measures included in the budget some of the “good news”?
    A. Yes. There is a genuine concern over the impact of the revaluation of business rates. Such as revaluation usually occurs every five years, but due to a two year delay in the previous valuation the impact is even more pronounced. The Treasury has claimed that only a quarter of businesses will see a rise with the remainder seeing little change or even a fall in their rates. However, London in particular, and the South East generally has seen a rise in the value of property resulting in increases for many businesses in our area.

    Small businesses that lose the Small Business Rate Relief will now benefit from a cap to increase their business rates of £600 or the transitional relief cap, with a limit in the first year of £600. Local authorities in England have also been given a discretionary fund of £300 million to give relief locally in respect of the increases.

    Pubs with a rateable value of up to £100,000 receive an additional benefit with a £1,000 discount to their business rates.

    Q. As a small business, were there changes to the digital record keeping requirements?
    A. Yes, in the mandatory commencement date for unincorporated businesses and landlords below the VAT threshold is put back a year to April 2019. For very small businesses, self-employed people and landlords with a turnover below £10,000, the digital record keeping and recording requirements won’t apply.

    Q. Is there any change to corporation tax?
    A. Yes, but only as previously accounted, as the rate falls from 19% from April 2017 to 17% in 2020.

    Q. Are there any things to keep an eye out for?
    A. Yes, the government has announced its intention to review a number of areas and introduce measures as appropriate, such as:

    • Tax avoidance – further action against promoters of tax avoidance schemes, including a new penalty for enablers of such schemes that are ultimately defeated by HMRC; the defence of relying on “non-independent advice” will also be removed
    • Image rights – guidelines will be published for employers who make image rights payments to employees 
    • Accommodation – consultation proposals will be published dealing with the taxation of employer provided accommodation.

    Q&A Times of Tunbridge Wells - Corporate & Commercial (Family Business) November 2018

    Q: I am the current owner of a Kent family business. My children have no desire to take over the business upon my eventual retirement, what other options are available? 

    Your desire to pass your family business onto one of your children is an aspiration held by many family enterprises. However, recent statistics show that, worldwide, only one in three family businesses manage to achieve a successful transfer of the business to the next generation. 

    If you don’t already have a succession plan in place and there is not a next generation family member engaged and ready to take over - then there are a range of options available to you. Whichever route you choose, it is important that careful thought is given to planning and exit strategy. 

    There are many dynamics in a family business that come into focus when considering your exit opportunities. In particular: the existing relationships and tensions within the family; skills and aspirations within the business; retirement plans and finances; taxation; wealth management and legacy. 

    Some options you could consider might be appointing a professional management team to run the business, widening out the business in terms of employee ownership, extending the business through careful use of franchising or using a family office to manage assets and invest in other businesses. However, the more common routes would be:   

    Management Buy Out:
    A Management Buy Out (MBO), is where the current management team purchases the family business from you. Subject to the MBO team securing funding, an MBO will help you achieve a relatively quick exit from the business whilst also leaving the business to be run by the management team that you know and trust. This should help to achieve a smooth transition for the business, to keep the existing culture, and retain staff and customers. 

    Another option to consider is the potential merger of your business with another family business. There are a wide variety of potential benefits from a successful merger including financial growth, diversification and overall progression. It can also help to secure the long-term future of your business.  

    Sale of the Business: 
    Although viewed by many as a last resort, you may decide that the most appropriate option is the sale of the family business. The sale of your business may provide you with a clean exit, as well as a financial reward for the time invested growing the business. 

    If this is your preferred route, careful planning for a potential sale as early as possible can help to ensure that; the sale process is as smooth as possible, such that you achieve maximum value for your shares and obtain any applicable tax reliefs (such as Entrepreneurs Relief).  

    The options set out above are only a handful of the many potential routes available to you on an exit. Early planning and good communication within the family around succession plans and exit options are vital to the future success of a family business.

    Joanne Gallagher is Head of the Corporate Team at Thomson Snell & Passmore.

    Alternatively please visit our website

    Q&A Times of Tunbridge Wells - GDPR November 2017

    Q:What is the GDPR?
    A: The General Data Protection Regulation (GDPR) comes into force across Europe and the UK on 25 May 2018. It will apply to nearly all companies, despite of your size. The GDPR is one of the most sweeping pieces of legislation that we have seen for some time, strengthening previous data protection laws and introducing new requirements, such as consent, data portability and the right to be forgotten and notification procedures for data breaches.

    Q: What is the biggest penalty for a business?
    A: Businesses can incur significant fines for breaching the provisions of the GDPR. Businesses can be charged up to 4% of the annual turnover if the GDPR is breached. This includes breach of the core principles such as consent, data subject rights and data transfers. 

    Q: What is the different between a data controller and a data processor?
    A: You are a ‘data controller’ if you say how and why personal data is processed. You are a ‘data processor’ if you are the one processing the data on the data controller’s behalf. Just because you are a data processor does not mean that you do not have data protection obligations.

    Q: What is the difference between personal data and sensitive personal data?
    A: Personal data is data relating to living individuals, also known as ‘data subjects’, who can be identified from that data. It need not be confidential data. Personal data can include names, the addresses and other location data, telephone numbers, job titles, medical details and more. 

    There are categories of personal data or ‘sensitive personal data’ that require extra care, such as racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, genetic and biometric data, health data, and sexual or sexual orientation data.

    Q: What is valid consent under the GDPR?
    A: Under the GDPR, consent must be: “Freely given, specific, informed and an unambiguous indication of the data subject’s wishes … signifies agreement to the processing of personal data relating to him or her.”

    In practice, this introduces a much higher compliance standard for obtaining a valid consent from individuals in comparison with existing DPA regulations. For this reason, it is inevitable that you will need to review and update how you obtain, record and manage your requests for consent.

    Q: How long does consent last?
    A: This depends upon the context. You will need to review the scope of the original consent and consider the individual’s expectations at that time. Consent won’t continue beyond:
    -    where your purpose for obtaining the data has expired or changed
    -    where your use of the data has changed
    -    withdrawal of consent
    -    if parental consent was originally obtained and the child subject comes of age. 

    Q: Do you need a Data Protection Officer (DPO)?
    A: No, only organisations employing more than 250 people must have (DPO). Exceptions include public authorities, have core activities that require carrying out large scale systematic monitoring of individuals (e.g. private security companies carrying out surveillance), or have core activities that require carrying out large scale processing of special categories of data (e.g. a hospital’s use of patient data) or data relating to criminal convictions or offences, then you must appoint a DPO. This applies to both data controllers and data processors.

    If you have any questions regarding the above, please contact Joanne Gallgher on 01322 623708 or or visit our website 

    Q&A Times of Tunbridge Wells

    Q: My business partner and I run a successful company together.  We are both directors and each have a 50% shareholding.  We want to protect our shares should the unexpected happen and one of us dies.  How can we do this?

    A: The death of a shareholder can create significant problems for a company like yours, but there are steps you can take to enable a surviving shareholder to retain control of the company should one of you die.

    You and your business partner should make sure that your shareholdings are protected in your Wills.  Each Will should provide that in the event of death, the deceased shareholder’s personal representatives will give the surviving shareholder first refusal to buy the shares.

    You might also want to consider obtaining life insurance policies, the proceeds of which would be used by the surviving shareholder to buy the shares.

    You will need to bear in mind that if the company continues to grow and be successful, the life insurance premiums may become prohibitively expensive and the value of the pay out may not match the value of the deceased shareholder’s shares.  You could put in place a shareholders’ agreement which is a private contract entered into by the shareholders of a company.  It sets out how ownership of a company is structured and the way decisions are to be made by the shareholders and the directors.

    The shareholders’ agreement could be drafted to provide that if a shareholder dies, their personal representatives will be forced to sell the shares to the surviving shareholder for the value of the insurance policy.  We refer to this as a ‘put and call’ option.  Of course, looking at it from the perspective of the family of the deceased shareholder – they could be forced to sell shares which might be worth much more in the future if the company continues to grow.  

    Therefore another option is for the company, rather than the surviving shareholder to buy back the shares from the personal representatives.  Company law does include a number of hoops that the company has to jump through before this can be done, but as long as the company has the cash to buy back the shares (or is able to borrow it) this can work quite well. 

    Other, more drastic alternatives include putting the company into liquidation on the death of a shareholder or selling it. 

    Q: What is the Consumer Rights Act 2015?

    A: The Consumer Rights Act 2015 (CRA) is the biggest overhaul of consumer protection legislation in 30 years.  It aims to consolidate and reform the consumer law in the UK, which previously has been spread throughout many different pieces of legislation. 

    Q: When does it take effect?

    A: The main provisions of the CRA came into force on 1 October 2015.  This means that it will affect all purchases made from this date.

    The CRA contains provisions governing transport service contracts, such as rail, air and sea services but these do not come into force until 1 April 2016.

    Q: Why is the law being reformed?

    The existing law on consumer rights was considered confusing for both businesses and consumers alike.  The law was particularly burdensome on businesses and the reforms aim to make it easier for businesses to comply with, and in turn easier for consumers to obtain redress.  Additionally, the existing law had not kept pace with technological developments such as the increasing marketplace for digital content.

    Q: What are the big changes?

    The CRA reforms the law in relation to consumer rights and remedies in relation to goods, services and digital content, and unfair terms in consumer contracts and consumer notices.

    • Consumers now have a right to reject faulty goods, or those which do not match the seller’s description within 30 days of purchase and receive a full refund.  This is more precise than the previous ‘reasonable’ timeframe which was open to interpretation.
    • With regards to provision of services, if the service is not provided with reasonable skill and care, the consumer now has a right to ask for repeat performance, and if that cannot be provided within a reasonable time, a reduction in price. 
    • If consumers order a product on time and it does not arrive by the promised delivery date, they are now entitled to cancel the order and receive a refund.
    • There is now requirement for terms and conditions, such as fees and charges, to be prominent and transparent i.e. not buried in small print.  It will now be much easier for consumers to challenge these unfair terms and conditions.

    Q: What does digital content mean?

    Digital content now forms an increasing part of our spending, but was not covered by the previous consumer legislation.  Digital content has now been added as a separate category to goods and services under the CRA.  If digital content such as music, apps, e-books and online games are faulty, consumers can now request a repair or replacement.  If the retailer will not provide this, then consumers can request a refund instead.  However, the 30 day limit does not apply to this and there are no time limits on retailers’ responses. 

    Additionally, if digital content causes any damage to the device it is used on, the consumer has a right for the damage to be repaired and for appropriate compensation. 

    Q: What if a trader does not comply with the CRA?

    There is an Alternative Dispute Resolution procedure which is available to settle disputes between traders and consumers efficiently and in a more cost effective way. With effect from 1 October 2015, traders must also give consumers details of a certified Alternative Dispute Resolution provider. If all else fails, consumers will still be able to pursue the matter in court.

    Q. What is a PSC Register?

    A. A PSC Register stands for Register of People with Significant Control. From 6 April 2016, UK incorporated companies limited by shares or guarantee, LLPs, unlimited companies and societas europaea need to create and maintain a PSC Register. This new company record has been introduced to increase transparency over who owns and controls UK companies, in order to inform investors and law enforcement agencies. It should be kept at your registered office or at another location notified to Companies House. From 30 June 2016, you are also required to provide information on PSCs to Companies House as part of your annual Confirmation Statement (which will replace the Annual Return). There are criminal sanctions for failure to comply with the new regime.

    Q. The share capital of my company is 11,000; I hold 6,500 shares and other shareholders, B has 3,000 shares and C has 1,500 shares. Do we need to be listed in the PSC Register?

    1. A. Yes, you and shareholder B will need to be listed in the PSC Register, but C may not. You will need to consider who in your company is a Person with Significant Control (PSC) and needs to be identified in the PSC Register. A PSC is a person who:
    2. holds more than 25% of shares in the company;
    3. holds more than 25% of voting rights in the company;
    4. holds the right to appoint or remove the majority of the board of directors;
    5. has the right to exercise, or actually exercises, significant influence or control over the company; or
    6. exercises or has the right to exercise significant influence or control over activities of a trust or firm which itself meets one or more of the first four conditions.

    You and shareholder B will need to be listed as a PSC. This is because you both hold more than 25% of shares in the company and therefore satisfy condition one; your shareholdings are 59% and 27% respectively. Shareholder C only has 9% of the shares and unless they fall within the other remaining four categories above, will not need to be listed as a PSC.

    The PSC Register should be kept up-to-date. For example, if you sell your shares to C and you no longer exercise significant influence or control but C does, you should provide a statutory notice to the company so the company can then update the PSC Register with the date you ceased to be a PSC i.e. when the shares are sold.

    Q. What form should the PSC Register take?

    A. There is no prescribed format for the PSC Register. However, government guidance available online states the PSC Register should never be blank - it should contain information about PSCs or if this has not yet been ascertained, give an update on the progress of the company’s investigations into identifying them. The PSC Register should contain:

    • the PSC’s name;
    • service address (and residential address if this is different);
    • nationality;
    • date of birth;
    • date of becoming and ceasing to be a PSC; and
    • the nature of the PSC’s control.
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